May 19, 2024

It’s a decent building on a visible corner on a road I think has potential to become more than what it is today.

So when I saw the “pending” sign on it recently, I was curious which business might be going in there.

I won’t name the location, the broker or the building owner because that’s not really the story.

But the future tenant? The tenant turned out to be a smoke shop.

Another smoke shop.

Basically, if you can smoke it or snack on it, there’s seemingly a market for it right now. Likewise, if you can wash or fuel your vehicle there or order from a drive-thru, you’ll find a retail concept on the other end looking to grow in Sioux Falls.

This is not so much a reflection on the city itself as a market, I think, but on the state of retail and by extension the state of the consumer.

This weekend marks the beginning of the annual conference of ICSC, which goes by its acronym but legally is the International Council of Shopping Centers. Our longtime readers might remember I attended for many years to report on national retail. I considered it again this year but was unsure how many actual deals I would have to share with you there, so I ultimately opted not to go.

We do have retail deals in process, and I’m hoping we still will have good ones to share this coming week or in the weeks ahead, but they’re definitely taking awhile, and the concepts that are expanding seem to be fewer.

We’ll delve into the retail market with a piece Monday, but I think it’s important to acknowledge that the retail industry doesn’t create markets of consumers; it reflects them.

So when I hear about smoke shops, my mind goes to the increase in vaping, especially among young people. When I hear about the growth of gas stations, convenience stores and car washes, I’m reminded that these are entities that can afford the rising cost of land, construction and financing because of what they sell.

Same thing with quick-service restaurants. Those concepts benefit from a market where it costs more to run larger restaurants, from food to labor, and from consumers who increasingly seem to be trading down. The other trend I’m seeing definitely reflects pent-up post-pandemic demand, and that’s indoor entertainment. Watch for details on who’s expanding there in the weeks ahead.

What’s not growing as much? Think apparel, and remember the multiple boutique closures we’ve seen in our market of late. You heard it hear first, maybe: Pay attention to Walmart and Amazon as emerging players in apparel, especially women’s fashion, because they are figuring out how to deliver appealing product that looks higher-end at lower prices.

And don’t miss the message behind McDonald’s recently announced $5 meal deal coming in June. The chain will sell four items — a McDouble or McChicken sandwich, small fries, small soft drink and a four-piece Chicken McNuggets — for $5. That’s one of several restaurants trying to lure in customers with reduced pricing. And you know they’re doing it for a reason.

One of the reasons I enjoy covering retail is for the insight the industry provides into the mind and heart of the consumer. And the message I’ve come away with reporting in recent weeks is clear: The consumer is pulling back, looking for value and possibly struggling to deal with it all.

The other theme is one I’ve addressed before but bears repeating: Sioux Falls is not the only game in town when it comes to new business growth. National retailers increasingly are looking not just to the suburban Sioux Falls communities but also to other South Dakota cities such as Aberdeen, Brookings, Mitchell and Yankton. We’re beginning to see national names open there, drawn by more affordable builds and population sizes that seem to be able to support them. And, again, these are value-driven players like Five Below, Marshalls and T.J. Maxx.

There has been plenty of collective speculation about when and how deep a recession could emerge. I don’t think retail is waving a red flag that a bad one is near, but I definitely can see a warning sign.